Red Flag 7: If Management Doesn’t Seem to Care Much About Internal Controls

The new Sarbanes-Oxley law also requires each annual report to include an internal control report, which will include management’s assessment of the strength of internal controls and related comments from the outside auditor. Any sign of either template style treatment of this new and potentially important area of disclosure or suggestions that there could easily be a breakdown in controls may be a red flag. The example of BDO Seidman’s warning to U.S. Technologies underlines this.